Why prudential policy matters to banks
Capital and liquidity ratios directly determine banks' capacity to finance the economy. These resources are scarce, and how they are managed affects lending to businesses, households and public investment across Europe. Banks must balance compliance with increasingly complex regulatory frameworks while remaining competitive and able to respond to stress scenarios.
Prudential standards must be proportionate and risk-sensitive, aligned with market realities rather than imposing unnecessary constraints on lending and investment.
A resilient and stable banking sector
The EBF promotes the effective implementation of the Basel standards across Europe. Our advocacy supports the work of EU and international authorities to ensure that EU implementation of global prudential rules preserves a level-playing field and ensures the ability of European banks to finance the economy.
A safe and consistent approach to liquidity management
The simplification of capital buffers to reduce EU gold-plating, and the preservation of stable metrics and indicators are key to ensuring an efficient capital management framework. Our expert groups advocate towards proportionate and risk-sensitive capital requirements that are aligned with market realities and do not impose unnecessary constraints on lending and investment.
Effective implementation of capital and liquidity standards
Capital and liquidity are scarce resources therefore they should be used efficiently. The level of capital and liquidity ratios determine the capacity of banks to finance the economy. The EBF proposes implementation options that strike the right balance between financial stability and economic growth which in Europe is fuelled mainly by bank lending.
EBF's expert group engagement
Through expert groups working on Prudential priorities, the EBF facilitates informed dialogue on a broad range of operational issues and strategic themes between bank experts, national banking associations, international standards setters, European regulators and supervisors.
Prudential work is steered by the Banking Supervision Committee, where all national banking associations are represented.
Some of the issues discussed: competitiveness, trade finance, specialised lending, securitisation, capital efficiency, interest rate risk, market risk, counterparty credit risk, non-performing loans, leveraged lending, macroprudential framework, and other strategic themes.
Key EBF positions
The EBF is working closely with all EU authorities to promote the regulatory simplification effort in support of European competitiveness and innovation. In the sphere of prudential policy, the EBF advocates for a review of the micro- and macro-prudential frameworks, removal of EU gold-plating measures above the standards set out by Basel, and clearer/more reliable coordination instruments amongst authorities.
Featured publications:
The Urgency to Simplify - EBF Letter to the European Commission - January 2026
EBF Press Release on ECB Simplification - December 2025
The European Banking Federation remains committed to driving forward the work on stopping the rising capital requirements in the EU, in support of capital efficiency and EU competitiveness. The EBF collaborates with its expert groups, as well as organisations like the Global Association of Risk Professionals (GARP) to ensure fact-based advocacy for the reduction of gold-plating and promotion of capital efficient banking regulation.
Featured publications:
- EBF - GARP study - December 2025
- GBI - EBF Cumulative Capital Demand Benchmarking Study - May 2025
Since the European Commission launched its review of EU banking rules in late 2021 with the objective of strengthening banks’ resilience and better preparing them for the future, the EBF has maintained a close dialogue with EU authorities through consultations and direct engagements. Our close engagement will continue as the EU aims to finalise the implementation of Basel 3.1 as the main part of the Banking Package.
The EBF supports revitalising EU securitisation and is pushing for a simpler, proportionate and risk-sensitive framework – e.g. on prudential calibration and on making due diligence, transparency and STS rules more workable for market participants. In addition, the EBF and its member banks collaborate with the ECB on the development of a fast-track process for significant risk transfer of eligible securitisations.
Featured publications:
- Council of the European Union's position on revitalising the EU's securitisation market - December 2025
- Open letter by AFME & EBF on the revision of the CRR securitisation framework - December 2025
- ECB launches fast-track assessments for capital and securitisation - December 2025
- DG FISMA's measures to revive the EU securitisation framework - June 2025
Risk management is at the core of the banking business. EBF offers hands-on expertise to legislators, supervisors and media on key issues affecting the relevant risk types: credit, market, counterparty, liquidity, funding, operational and interest rate risk. Prudential aspects are analysed and discussed.
Featured publications:
- EBF Response to Commission's Targeted Consultation on FRTB - April 2025
- EBF response to Consultation paper amending Guidelines on definition of default - October 2025
- EBF Response to Consultation on Draft Guidelines on the methodology to estimate and apply credit conversion factors under the Capital Requirements Regulation - October 2025
The EBF is working closely with EU institutions and policymakers to ensure that the prudential framework appropriately reflects the low-risk, well-collateralised nature of specialised lending — covering project finance, object finance (including aviation and shipping), commodity finance and income-producing real estate. The EBF advocates for targeted regulatory adjustments to restore risk sensitivity, remove EU gold-plating, and preserve European banks' capacity to finance the EU's strategic priorities in energy, transport, infrastructure and industrial competitiveness.
Featured publications:
The EBF is engaging with regulators and supervisors to advocate for a more proportionate and risk-sensitive approach to Leveraged Finance. In the EBF's view, the current definition of Leveraged Finance creates a competitive disadvantage for European banks relative to non-regulated institutions. The EBF calls for a narrower scope of exposures, greater risk sensitivity and exemptions for sectors of strategic importance to the EU.
Featured publications:
EBF White Paper on Leveraged Finance – July 2025
The EBF is engaged in advocacy on the prudential treatment of trade finance instruments, with a particular focus on the EBA's draft Regulatory Technical Standards on off-balance sheet items and Unconditionally Cancellable Commitments (UCCs). As proposed, the draft RTS could significantly increase capital requirements for documentary credits, trade guarantees and UCCs, undermining the competitiveness of EU banks and the availability of affordable trade finance for European businesses, in particular SMEs. The EBF has submitted a formal consultation response, gathered case studies from member banks, and engaged directly with the EBA to advocate for a more proportionate and risk-sensitive outcome.
Featured publications:
The EBF is engaging with the EBA on the prudential treatment of agricultural lending, in the context of the EBA's mandate under Article 505 CRR3 to assess whether a dedicated risk weight for agricultural exposures is warranted. The EBF's key concern is that the current framework — in particular the interaction of the IRB LGD input floor and the SA output floor introduced under CRR3 — disproportionately increases capital requirements for agricultural loans secured by farmland, despite their historically low loss rates and high-quality overcollateralisation. The EBF advocates for the EBA to acknowledge this miscalibration, clarify the regulatory perimeter for agricultural exposures, and frame its analysis within the EU's broader strategic autonomy and food security agenda.
The EBF supports practical, risk-sensitive implementation of the Fundamental Review of the Trading Book (FRTB) and market risk rules, while consistently advocating for operational proportionality and international level playing fields.
To ensure that the EU banking sector can compete on a level playing field with international peers, the European Commission has introduced targeted, time-limited amendments to the EU’s implementation of the FRTB, applicable for three years from 1 January 2027. The EBF has actively contributed to the Commission’s various consultations, representing the views and concerns of European banks and highlighting the practical challenges associated with the implementation of the new market risk framework. This engagement has been particularly important given the Commission’s decision to postpone the application of the FRTB market risk rules twice, with the aim of ensuring that the framework appropriately addresses the challenges identified.
Featured publications:
EBF response to Commission consultation on FRTB - May 2026
EBF response to Commission consultation on FRTB - January 2026
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